Issue of equity Placing and issue of shares to Directors Open Offer to raise up to £200,000

September 11, 2017

Issue of equity Placing and issue of shares to Directors Open Offer to raise up to £200,000

11 September 2017

AIM: STEL

Stellar Diamonds plc

(“Stellar” or the “Company”)

Issue of equity

Placing and issue of shares to Directors

Open Offer to raise up to £200,000

Stellar Diamonds plc, the London listed diamond development company focused on West Africa, announces that it has conditionally raised, through Peterhouse Corporate Finance Limited (“Peterhouse”), £330,000 through the issue of 10,153,847 new Ordinary Shares of the Company at an issue price of 3.25 pence per share (“Placing Shares”) (the “Placing”). Completion of the Placing is expected to occur on or around 14 September 2017.

In order to provide all Stellar shareholders with an opportunity to participate in the proposed issue of new ordinary shares of the Company, the Company proposes to raise up to approximately £200,000 (before expenses), at 3.25 pence each through an open offer (“Open Offer”) to qualifying shareholders (“Qualifying Shareholders”). Subject to completion of the Placing, investors participating in the Placing will also be considered Qualifying Shareholders for the purpose of the Open Offer. Further details of the Open Offer and a circular providing full details of the Open Offer are expected to be announced and posted to Shareholders as soon as practicable.

Use of proceeds and Update

The Tongo mining licence has been approved by the Minerals Advisory Board in Sierra Leone, subject to the payment of the Tongo environmental licence. Therefore, the net proceeds of the Placing, together with the net proceeds of amounts raised from the Open Offer, will prioritise payment of the Tongo environmental licence and renewal of the Tonguma environmental licence (estimated $250,000 for both). Once the Tongo mining licence is issued fiscal terms may be negotiated and ratified via the Sierra Leone Government and Parliament respectively. Furthermore, funds will be allocated to ongoing costs related to the Tongo-Tonguma project in Sierra Leone, general working capital, and the payment of certain existing creditors whilst the Company continues to progress debt and equity financing to bring the high grade and high value 4.5 million carat Tongo-Tonguma project into production.

Further to the Company’s announcement on 2 August 2017 in respect of the Tongo-Tonguma project, the Company continues to keep Octea Mining up to date as to the status of project financing for the Tongo-Tonguma mine development project in Sierra Leone and expects to formalise an extension of the long stop date for satisfaction of certain conditions precedent to the Tribute Mining and Revenue Agreements as required.

The disposal of the Company’s Guinea projects and assets is progressing with further due diligence, audit and tax affairs being finalised. The results of these will determine the final net proceeds to be realised. Both Stellar and the acquirer (BDG Capital) have agreed to extend the exclusivity period to the end of September, or beyond should it be required to finalise the sale process.

Proposed issue of shares to Directors

The Directors continue to monitor and manage the Company’s working capital very carefully. In order to preserve cash, certain Directors and senior management of Stellar have agreed to convert a net total of £64,299 in accrued fees, salary, expenses and benefits for the period up to the 30 September 2017 into Ordinary Shares of the Company (“Fee Shares”).

Director/Senior Manager

Number of Fee Shares

Total beneficial holding after issue of the Fee Shares

% holding following Admission1

Peter Daresbury (Director)

565,439

1,833,733

3.34%

Karl Smithson (Director)

365,728

1,483,838

2.71%

Hansjörg Plaggemars (Director)

587,862

587,862

1.07%

Steven Poulton (Director)

0

1,216,745

2.22%

Rowan Carr

445,657

1,037,404

1.89%

Phillip Knowles

13,751

125,814

0.23%

Total

1,978,437

6,285,396

11.46%

1Includes the Placing Shares and Fee Shares but excluding any Open Offer Shares which may be issued.

The issue of the Fee Shares to certain Directors are related party transactions as defined by AIM Rules for Companies. The Independent Director, being Steven Poulton, having consulted with the Company’s nominated adviser Cairn Financial Advisers LLP, considers that the terms of the proposed issue of the Fee Shares are fair and reasonable insofar as the Company’s Shareholders are concerned.

Terms and Conditions of the Placing

The Company has conditionally placed 10,153,847 Placing Shares at 3.25 pence per Placing Share to raise £330,000 (before expenses). Issue of the Placing Shares by the Company is conditional on inter alia receipt of the funds in respect of the Placing Shares and admission of the Placing Shares to trading on AIM (“Placing Shares Admission”).

Terms and Conditions of the Open Offer

Following the Placing, and in the interests of minority shareholders, the Company is proposing to raise a further amount of up to approximately £200,000 (before expenses) pursuant to the Open Offer at 3.25 pence each per share, being the same price as the price at which the Placing Shares are being issued pursuant to the Placing. A total of up to 6,153,846 Open Offer Shares will be offered to Shareholders. Peterhouse have agreed to use reasonable endeavours to procure subscribers for any Open Offer Shares not subscribed for under the Open Offer.

A further announcement will be made in relation to the terms, conditions and timetable of the Open Offer, however, Qualifying Shareholders will be able to subscribe for Open Offer Shares in proportion to their holding of Existing Ordinary Shares held on the Record Date. Shareholders subscribing for their full entitlement under the Open Offer will also be able to request additional Open Offer Shares as an excess entitlement, up to the total number of Open Offer Shares available to Qualifying Shareholders under the Open Offer. Full details of this will be set out in the Open Offer circular.

The Open Offer will be conditional on receipt of valid subscriptions and payment in full for subscriptions and admission of any Open Offer Shares subscribed for to trading on AIM. The issue of any Open Offer Shares will use the Company’s existing share authorities.

Admission of Placing Shares and Fee Shares

Application for admission to trading on AIM of the Placing Shares and Fee Shares has been made and it is expected that the issue and admission of the Placing Shares and Fee Shares will occur on or around 14 September 2017 (“Admission”). Following Admission the total number of voting rights in the Company will be 54,853,901 and Shareholders may use this figure as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, the Company under the FCA’s Disclosure Guidance and Transparency Rules.

Defined terms used in this announcement

“Existing Ordinary Shares”

the existing Ordinary Shares of the Company that will be in issue following completion of the Placing and issue of the Fee Shares;

“Qualifying Shareholders”

holders of existing Ordinary Shares on the Record Date (other than Shareholders resident in or citizens of any Restricted Jurisdiction);

“Open Offer Shares”

new Ordinary Shares which will be offered to Qualifying Shareholders pursuant to the proposed Open Offer;

“Ordinary Shares”

ordinary shares of 1 pence each in the issued share capital of the Company from time to time;

“Record Date”

Expected to be on or around 14 September 2017;

“Restricted Jurisdiction”

any U.S. person (as defined in Regulation S) or any address in the U.S., Canada, Australia, the Republic of South Africa, the Republic of Ireland, Japan or any other country outside of the United Kingdom where a distribution may lead to a breach of any applicable legal or regulatory requirements;

Stellar is an AIM listed (AIM: STEL) diamond development company focused on the 4.5 million carat high-grade and high value Tongo-Tonguma kimberlite diamond project in the world famous diamond fields of eastern Sierra Leone. An independently generated mine plan, based on over 66,000m of drilling that has been completed to date, envisages the production of over 4 million carats, generating gross revenues of more than US$1.5 billion, over a 21 year life of mine. Initial production at Tongo-Tonguma is scheduled to occur in the first year of development, building up to over 200,000 carats per annum, with a weighted average modelled diamond value of $239 per carat. The Tongo-Tonguma kimberlites have the potential to be the highest dollar per tonne of any kimberlites in Africa yielding a Post-tax NPV(8) of US$104 million attributable to Stellar and an IRR of 31%.

This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014.

Caution regarding forward looking statements

Certain statements in this announcement, are, or may be deemed to be, forward looking statements. Forward looking statements are identiﬁed by their use of terms and phrases such as ”believe”, ”could”, “should” ”envisage”, ”estimate”, ”intend”, ”may”, ”plan”, ”potentially”, ”will” or the negative of those, variations or comparable expressions, including references to assumptions. These forward looking statements are not based on historical facts but rather on the Directors’ current expectations and assumptions regarding the Company’s future growth, results of operations, performance, future capital and other expenditures (including the amount, nature and sources of funding thereof), competitive advantages, business prospects and opportunities. Such forward looking statements reﬂect the Directors’ current beliefs and assumptions and are based on information currently available to the Directors.

A number of factors could cause actual results to differ materially from the results discussed in the forward looking statements including risks associated with vulnerability to general economic and business conditions, competition, environmental and other regulatory changes, actions by governmental authorities, the availability of capital markets, reliance on key personnel, uninsured and underinsured losses and other factors, many of which are beyond the control of the Company. Although any forward looking statements contained in this announcement are based upon what the Directors believe to be reasonable assumptions, the Company cannot assure investors that actual results will be consistent with such forward looking statements. Accordingly, readers are cautioned not to place undue reliance on forward looking statements. Subject to any continuing obligations under applicable law or any relevant AIM Rule requirements, in providing this information the Company does not undertake any obligation to publicly update or revise any of the forward looking statements or to advise of any change in events, conditions or circumstances on which any such statement is based.